Health insurance trends: Is lower inflation sustainable?
In our latest report on international private medical insurance (IPMI), we highlighted a new health insurance trend: globally, IPMI premium inflation was lower in 2017. This means that premiums did not increase by as much overall when compared to previous years. The thing is, it is important to look at whether this trend is sustainable, and whether you can expect lower premium increases in 2018 and beyond. In order to try and figure this health insurance trend out, this article takes a deeper look into IPMI inflation by region, insurer, and average inflation over time.
Global IPMI Inflation in 2017
Our latest report, available here, has found that globally, IPMI premiums increased by an average of only 7.0% in 2017. This represents a 2.2 percentage point decrease from average inflation in both 2015 and 2016. Sure, this is not a huge decrease, but it is enough to warrant looking into.
From the graph above, it is clear that the decrease is actually part of a larger general health insurance trend: Barring a few years of increases, globally, average IPMI premium inflation has been trending downward since 2009.
As we point out in the Inflation Drivers section of the report, we have seen insurers implementing better cost and inflation containment strategies. These strategies have undoubtedly allowed insurers to reign in, or at least better manage health insurance inflation, thus resulting in somewhat lower inflation percentages on a global scale.
Health insurance inflation by region
In order to better understand health insurance inflation it helps to not only look at the global trend, but also the regional and local ones. For the report we have divided the locations discussed into three regions, and provide a look at average inflation in each of these sections.
IPMI inflation in Southeast Asia
Historically, IPMI inflation in Southeast Asia tends to follow the global trend. We are seeing the same downward trend of premium inflation, however, as the graph below highlights, the region is a little more extreme in its movements.
As we can see, the region saw premiums increase at an average of 6.9% in 2017, much lower than the 9.8% inflation seen in 2016. This is interesting, as it points to a potential change in the region. Historically, we have been able to split countries into two in the region. Developing nations saw historically lower premium inflation, while the developed nations saw higher health insurance premium inflation.
As the table above highlights: in 2017, this trend was not overly apparent, as China and Singapore both saw lower average inflation than Thailand and the Philippines. This lower inflation in some locations resulted in the lower regional figure.
IPMI inflation in the Middle East
In 2017, the Middle East was the only region that actually bucked the global health insurance trend and saw IPMI premiums increase at an average of 9.6%.
Interestingly, when comparing IPMI inflation in the Middle East with the global chart above, there is a slight downward trend, but it is much less apparent. This is primarily due to Dubai and the introduction of mandatory health insurance in the Emirate.
IPMI inflation in the Rest of the World
The Rest of the World covers a vast area but does also follow the global health insurance trend of generally decreasing inflation. While the other regions (namely Southeast Asia) saw a fairly sharp drop between 2016 and 2017’s inflation figures, the Rest of the World saw a much smaller drop: from 7.9% in 2016 to 7.3% in 2017.
The table below provides a bit more insight into why premium inflation is a bit lower in 2017, with countries like the UK and Kenya seeing below, or average inflation. Brazil is a bit of an outlier however, as inflation rose slightly from 8.3% in 2016 to 8.4% in 2017.
Health insurance inflation by insurer
When trying to determine whether the trend of decreasing health insurance inflation is relevant it is important to look not only at inflation by region but also by insurer as well, as insurers do not increase rates at the same percentage as their competitors.
The chart below provides the average five-year premium inflation (2013 – 2017) by insurer. As you can see, even among the insurers, average inflation by country will differ. What this data truly highlights is the fact that it is important to closely review plans and ask about premium inflation over time before purchasing. This is because historically high inflation globally and locally could point to higher premiums in the future.
Is this health insurance trend realistic?
While there is a general downward inflation trend, the charts above also highlight that International health insurance inflation is somewhat variable. Some years it will be higher than the year before, and some years it will be lower. This tells us that a downward trend might not be fully realistic to expect.
For consumers, consistently decreasing premium inflation would appear to be a great thing. We believe, however, that this is not a sustainable trend and will likely not continue. As we point out in the report, there are six key drivers that have had an impact on international health insurance inflation.
Drivers like increased compensation, improving medical technology, and even increasing demand for care will result in higher medical costs. These increased costs have a direct impact on health insurance premiums.
Insurers are increasingly implementing strategies to offset these costs and have largely succeeded, but if we see costs continue to increase then inflation could start creeping up again. This will result in higher inflation globally.
What can I expect for future premium increases?
The charts above and in the report highlight the fact that health insurance inflation is not smooth. Some years it will be higher than others, which means your premiums might increase more some years and less in other years. It is important to, therefore, take into account the average premium increases over time. This data can be utilized as a benchmark to help determine and even forecast healthy/sustainable premium inflation.
For international health insurance, the best metric to use would be the Compound Annual Growth Rate (CAGR). Utilizing the report data, we have created the below table:
|IPMI Premium CAGR: 2009 – 2017|
If inflation is above this figure, it is worth looking into why and whether there is something that can be done to offset the increase. Be aware here however, as the data utilized in this report and article is based on individual policies and does not include maternity cover or other costly add-ons. In some cases, inflation in plans that include this cover will be much, much higher.
If you are looking to learn more about health insurance trends and how they impact your premiums, why not download a copy of our International Private Medical Insurance Inflation Report? Alternatively, feel free to contact our team of advisors who can help you find the right plan for yourself, your family, or company. Contact us today.